501(c)(3) Alternatives

Valerie Beaman at Americans for the Arts' ArtsBlog searches the inns and outs of the taxcode for variations on the standard nonprofit business model (that "501(c)(3)" code) that might help out smaller troupes.

For newer, smaller organizations or independent artists without nonprofit status, fiscal sponsorship can be a solution. Fiscal sponsorship is where a legally recognized 501(c)(3) provides limited financial and legal oversight for a project initiated independently by an artist or an organization. The sponsorship provides eligibility for the project to solicit and receive grants and tax-deductible contributions through the sponsoring 501(c)(3) organization.

The arts incubator is another service that existing 501(c)(3) organizations can provide for emerging artists. Instead of the ability to solicit funds, the legally recognized 501(c)(3) provides space, back office services and professional development.

And what about for-profit?

The next model is the low-profit, limited liability company, or L3C. It is a hybrid of a nonprofit and for-profit organization designed to attract private investments and philanthropic capital in ventures designated to provide a social benefit. The L3C has an explicit primary charitable mission and only a secondary profit concern, but unlike a nonprofit, the L3C is free to distribute the profits, after taxes, to owners or investors. This model is currently legal in Michigan, Vermont, Illinois, Wyoming, Utah, Louisiana, North Carolina, and Maine (August 2011).

Certified Benefit Corporations (B corporations) are a new type of corporation which uses the power of business to solve social and environmental problems. B Corporations must meet rigorous and independent standards of social and environmental performance, accountability, and transparency. Their legal structure expands corporate accountability so they are required to make decisions that are good for society, not just their shareholders. This format is available in Maryland, Vermont, New Jersey, Virginia, and on the books for nine more states in 2011.

I must say, I'm feeling stronger and stronger about finding a model for a theatre that doesn't require a Board of Trustees. If it's technically "profitable," all the better. But the point would be freedom not the relatively limited profit potential involved in such a venture.

(hat tip: American Theatre Magazine feed)